Estate Plans May Need Update (Fisher Law Office)

Estate Plans May Need Update

Nothing lasts forever, they say. Estate plans are no exception to the rule. They should be kept current with facts, laws, and regulations. There are several important reasons why estate plans may become out-of-date:

Last-minute estate tax legislation. Congressional dithering over the last 2 years created quite a dilemma in the estate planning process. An anomaly was created for 2010. For people making their final transition in that year, it was unclear whether we would or would not have an estate tax, and if we would or would not have modified carryover basis.

However, at the last minutes of 2010, Congress finally acted.

The "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" was enacted just before the end of 2010. Extending Bush-era tax relief on many fronts, the estate tax uncertainties are given relief for at least a while.

The estate tax for 2011 and 2012 will have an exemption amount of $5 million per individual, and a maximum rate of 35%. For estates of people passing on in 2010, an election was made available to follow either the 2010 rules (no estate tax, but capital gains concerns) or the 2011 rules.

However, the new rules last only for 2 years. After that, we will have the same problem as for 2010, unless Congress acts again.

The passage of time itself. Beneficiaries may make their transition, or new potential beneficiaries may be born, adopted, or married into the family. Assets may be acquired, appreciate or depreciate in value, or be disposed of. Beneficiaries for whom trusts were created may no longer need them for their protection. Other beneficiaries may now need trusts, though they did not previously.

Changes in laws. The changes in laws may have application to pre-existing estate plans. For example, Michigan adopted a completely new probate code which became effective April 1, 2000. Many established rules were changed by this new law. And those rules were further changed when Michigan adopted its version of the Uniform Trust Code, which became effective April 1, 2010.

Changes in the federal estate tax rate structure. This could have significant impact on individual estate plans. Tax-driven trust planning may no longer be required.

Changes in distribution rules for qualified plans, including IRA's.

Estate plans need periodic review, and there are special reasons for talking to your estate planning attorney about them now.

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